Can I keep my car and house in bankruptcy?

In Chapter 13 bankruptcy you enter a 3 or 5 year repayment plan so you can keep your assets.  However, you will need to continue making payments on your home, car, or other asset that secures a debt. 

Chapter 7 is different from Chapter 13 in that the Chapter 7 trustee liquidates your non-exempt assets in order to pay your creditors.  However, most Chapter 7 debtors have “no-asset” cases, meaning all of their assets are exempt and they do not have to give up anything in bankruptcy.

Exemptions differ from state to state.  There are two sets of exemptions in California that you can choose from.  You must choose just one set—you cannot pick and choose from one set to the other. 

Under the first set of exemptions, you can hold on to $50,000 to $125,000 of equity in your home, depending on your age and whether you have a disability.  This means that if you are single, not disabled, and under 65 years of age, you can hold on to your home as long as the house has $50,000 or less in equity (i.e., when you deduct the amount owed on your home from the current value of your home, the resulting figure is $50,000 or less).  If you have more than $50,000 of equity, you can still hold onto your home by paying the difference to the trustee.  For example, if you have a $200,000 house and the amount of mortgage you owe is $120,000; your equity is $80,000.  Therefore, you would pay the trustee $30,000 to hold on to your home.  Under this same set of exemptions, up to $1,900 of equity in your car is protected.  You can always pay the trustee the difference if the equity in your car is greater than $1,900.

If you do not own a home, or the equity in your home is $17,425 or less, you may want to choose the second set of exemptions which offers a “wildcard” exemption of $925 plus any unused amount of the $17,425 allowed for the equity in your home.  That means you can potentially have $18,350 of exemptions to be applied anyway you wish.  If you have more than $2,775 of equity in your car, you can apply some of the wildcard exemption to the $2,775 of exemption specifically allotted for your car.

Determining which set of exemptions is right for you requires review of a complete list of all of your assets, their values and the amount of debt owed on each.  If you have any questions on exemptions for your specific case or want to learn more about how bankruptcy may be the solution to your financial woes, please email us at info@llkattorneys.com.